Introduction
In the case of Swastik Co-op. Credit Society Ltd. v. Income Tax Officer[i], the Hon’ble Gujarat High Court quashed the reassessment order seeking to reopen the assessment on the ground that Swastik Co-op. Credit Society Ltd (‘Assessee’) had justified the reason for having 2 PANs; therefore, the opening of reassessment proceedings merely on this ground was held invalid.
Brief Facts
As a co-operative society, the Assessee provides credit facilities to its members. The income earned by the Assessee was eligible for deduction under s. 80P of the Income-tax Act, 1961 (‘ITA’). The Assessee under PAN AAVFS6160N had filed an income tax return (‘ITR’) for the assessment year (‘A.Y.’) 2017-18, claiming deductions under s. 80P of the ITA. However, the Assessee failed to claim deductions under s. 80P of the ITA in ITR-5 because PAN’s fourth figure was ‘F’ (representing firm) instead of ‘AOP’, thereby causing e-filing issues. The Assessee has used this PAN for the past many years.
To resolve this issue, the Assessee sought assistance from the Central Processing Centre, Bangalore, which directed the Assessee to contact the Jurisdictional Assessing Officer, who then advised the Assessee to apply for a new PAN and surrender the old PAN once the new PAN is issued. Accordingly, a new PAN AAPAS3755G was issued to the Assessee sometime in 2020. The Assessee duly informed its jurisdictional income tax officer regarding the issue of the new PAN.
The assessing officer (‘AO’) sought to reopen the proceedings on the basis of RMS -Non-Filing of ITR—PAN Cases for A.Y. 2017-18 on the ground that the Assessee had not filed its ITR under the new PAN AAPAS3755G for the A.Y. 2017-18.
In response, the Assessee submitted details about filing the ITRs for the A.Y. 2017-18 under the old PAN AAVFS6160N and the circumstances/reasons for the same. However, the AO passed the order under s without considering the same. 148A(d) of the ITA.
Aggrieved by such order, the Assessee filed the petition under a. 226 of the Constitution of India challenging the reassessment proceedings for the A.Y. 2017-18.
Observations of the High Court
The High Court observed that the Assessee had given proper justification for the existence of two PANs and why the ITR for A.Y. 2017-18 was filed under the old PAN.
The High Court further observed that the AO erred in passing the order under s. 148A(d) of the ITA solely because the ITR was not filed under the new PAN AAPAS3755G, which did not exist during the A.Y. 2017-18. Accordingly, the High Court set aside the impugned order dated 30.03.2024 and quashed the reassessment proceedings initiated against the Assessee.
Analysis and Conclusion
The High Court’s reasoning about the existence and justification of two PANs is well-reasoned. It correctly holds that reassessment proceedings are not maintainable simply because the ITR has not been filed under the new PAN. This position would hold good so long as the information disclosed in the ITR filed by the Assessee is correct and complete.
However, the reopening proceedings would be maintainable if the department has any material or information that suggests that any income has escaped assessment and was not disclosed in the ITR. In the facts of the present case and the findings of the AO reproduced in the order, it appears that the AO had passed the order under s. 148A(d) of the ITA not only on the basis of multiple PANs but also on the basis of certain bank accounts with Indian Overseas Bank (which had certain debits and credits) which were not disclosed in the ITR filed by the Assessee. There is no reasoning or finding in the decision of the High Court on this aspect. On this basis, the decision of the High Court may be challenged by the department before the Supreme Court.
End Note
[i] [2024] 164 taxmann.com 444 (Gujarat).
Authored by Purvi Garg, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.